Approach SA’S energy shift pragmatically
A sensible climate policy must balance the imperative of decarbonisation, socioeconomic policy and security of supply considerations
In the run-up to the United Nations Climate Change Conference — COP26 — co-hosted by the British and Italian governments in Glasgow next month, many large economies faced severe energy shortages that threatened both their energy supply and food security. Their tribulations showed just how complicated managing energy transition would be for many countries, especially those less economically resilient than rich countries.
That a major economy like China looks vulnerable in the face of power deficiencies should be a rude awakening for other countries, including South Africa, under pressure from Britain, the US and Europe to decommission their coal resources — or abandon gas — at one fell swoop.
China experienced a crunch in its power supply recently. This choked growth and affected businesses and households. The Chinese government had to call on coal miners to ramp up supply for utilities to keep the lights on. China is often hailed as a great example of how its government managed to get more than 500 million people out of poverty within a generation yet, without secure energy in this case provided by coal, such a miracle would not have been possible.
No doubt, China’s growth path exacted a heavy toll on the environment, and so did the European and American industrial revolutions. Still, the choices to be made to achieve development are not easy, especially for countries that are catching up and whose citizens are trapped in conditions of poverty and unemployment.
The debate on decarbonisation is impoverished by its neat binaries — you either decarbonise radically, or you are painted as a villain if you do anything else, even if you take one step back and two steps forward in the direction of decarbonisation. It is also a debate mainly driven by zealots who are impervious to the pain of socioeconomic adjustments of the energy transition whose brunt will fall on poor workers.
The banks, too, are on a stampede to exit these resources yet are conspicuous by their absence in the debates about the appropriate size of climate finance, and their contribution to economic inclusion and just transition negligible.
China calibrates its pragmatic use of coal with increasing investments in renewable energy rather than basing its future decisions purely on idealism. According to researchers at the Centre for Global Development, China is one of the World Bank’s top borrowers. Between 2016 and 2019, China borrowed more than $7.8-billion from the World Bank; nearly 40% of this was to fight climate change.
The Chinese government knew better that such a step did not mean a radical policy shift of decommissioning all coal power stations but a gradual deceleration. A country can be committed to a low-carbon trajectory and take a sensible position in retaining resources that may not be considered clean to guarantee energy supply security and to sustain livelihoods.
There should be no single formula decreed from Europe when it comes to climate and energy policy. Even Europe and Britain still rely heavily on gas as part of their energy transition. Alongside climate policy, European countries are factoring in strategic gas reserves through pooled procurement of natural gas and expanding storage infrastructure to avoid disruptions to energy supplies caused by high prices in the future.
Europe has planned investments to the tune of €104-billion in gas pipelines and liquified gas terminals despite its rhetoric of the green deal. These investments are rationalised in the name of securing greater security of energy supply to sustain jobs and businesses.
In the same month that the British government put up a £200-million challenge to companies to come up with strategies for reducing the country’s carbon dioxide emissions, with another hand it gave an unspecified amount to a fertiliser manufacturer to produce significant volumes of carbon dioxide on an emergency basis.
This British quagmire just shows how incredibly difficult the decarbonisation path will be for both rich and poor countries, especially the latter group of countries that are capital starved.
South Africa and other African countries that have significant endowments in hydrocarbons must manage their green transition gradually and pragmatically while also paying attention to justice issues both present and historical.
Governments cannot call for high growth rates while committing to radical decarbonisation, more so when investments in green infrastructure are thin, climate finance is a mirage, the localisation strategy is weakly defined, and there is no sound plan for upskilling workers and providing enhanced social security.
In its nationally-determined commitments, which it deposited with the United Nations Framework Convention on Climate Change in 2015, South Africa committed to addressing climate change based on science, equity and sustainable development. To this end, the country’s Climate Change Bill sets out to ensure a just transition that considers each country’s common but differentiated responsibilities and respective capabilities.
Like other comparative developing countries, South Africa will need climate finance to achieve its nationally determined commitments.
In a New York Times article Larry Fink, chief executive of Blackrock, a leading global investment management company, reiterated the call that developed countries should bear the cost of climate change and use finance to fight one of the biggest challenges of our generation. “Rich countries, Fink contends, “must put more taxpayer money to work in driving the net-zero transition abroad.” Climate finance is essential for oiling the wheels to net zero, and without it will be improbable for developing countries such as South Africa to meet their commitments.
Developed countries have so far shown a lack of seriousness in putting their money where their mouths are, contributing a mere $16-billion in grants annually to developing countries. According to Blackrock, nothing short of a commitment of $100-billion in public funds annually over 20 years will make a noticeable dent; some argue that even this amount will be insufficient.
There is a long history of unmet promises by Western governments. At the Financing for Development Conference in Monterrey, Mexico, in 2002, rich countries committed to finance development in developing countries, eliminate poverty and raise living standards. These goals were to be achieved by mobilising foreign direct investment towards infrastructure development and using trade to support development. Nothing of significance came out of this.
Three years later, the festival of promises moved to the Gleneagles G8 summit hosted by the then British prime minister, Tony Blair. Developed countries promised, in 2005, to make poverty history, and more specifically, pledged to increase aid to Africa by $25-billion by 2010. They delivered less than half of that amount. The credibility of these countries to meet climate finance commitments should be seen through the lens of this recent history.
South Africa must think seriously about managing its energy transition by approaching economic restructuring based on its needs. A sensible climate policy must balance the imperative of decarbonisation, socioeconomic policy and security of supply considerations.
The South African government also needs to work closely with other
African countries such as Egypt, Nigeria and Algeria, which must make hard choices in managing a low-carbon trajectory.
These countries face the challenge of undertaking structural diversification to create new industries that fully exploit their hydrocarbon endowments to improve their citizens’ living standards while promoting a gradual green transition. If it was not for hydrocarbons, Norway would not have built up fiscal resources and capabilities to become a knowledge-driven economy. Of course, governance and inclusive institutions helped, but oil and gas paved the way.
Countries such as Australia, India, Indonesia and China could also offer more pragmatic lessons for how South Africa negotiates tough trade-offs. Australia, for example, has adopted a diversified strategy that entails deepening partnerships with a range of countries such as the United Kingdom, Germany, Japan and Singapore. These relationships are for sourcing various technologies from hydrogen to large-scale energy storage to carbon capture, use and storage rather than blindly pursuing a narrow decarbonisation path.
Finally, it is the primary role of the state, rather than private markets, to guarantee the country’s security of energy supply. For this reason, investment in gas infrastructure and enabling Eskom to compete across the energy mix, both in South Africa and the broader African continent, could help the country become energy secure.
The debate is impoverished by its neat binaries: decarbonise radically, or you are a villain